Short answer: Both are bank capital, but AT1 carries much more risk. AT1 has no maturity date, its distributions can be cancelled and are not made up, and it ranks just ahead of shares. Tier 2 has a maturity date, its interest must be paid, and it ranks ahead of AT1. Both can be converted into shares or written off if the bank is not viable. Candour Capital's range has 119 Tier 2 and 8 AT1 bonds in Australian dollars.
| AT1 | Tier 2 | |
|---|---|---|
| Maturity | None (perpetual), callable | 10 to 15 years, usually callable after 5 |
| Income | Can be cancelled, not made up | Must be paid |
| Ranks | After Tier 2, ahead of shares | After senior, ahead of AT1 |
| Bonds on our range | 8 | 119 |
| Median floating margin | BBSW + 2.73% | BBSW + 1.95% |
| Bond | Ranking | Type | Coupon | Maturity | First call | Minimum |
|---|---|---|---|---|---|---|
| Suncorp AU3FN0109666 | Additional Tier 1 (AT1) | Fixed | 7.043% | Perpetual | 2032-06-17 | A$100,000 |
| Barclays XS3298830863 | Additional Tier 1 (AT1) | Fixed | 8% | Perpetual | 2032-06-15 | A$250,000 |
| UBS CH1485827070 | Additional Tier 1 (AT1) | Fixed | 6.375% | Perpetual | 2030-09-29 | A$250,000 |
| BNP Paribas FR0014014MD4 | Additional Tier 1 (AT1) | Fixed | 7% | Perpetual | 2031-06-02 | A$200,000 |
| QBE AU3FN0110086 | Additional Tier 1 (AT1) | Floating | BBSW + 2.50% | Perpetual | 2033-05-19 | A$100,000 |
| MUFG XS3531960907 | Additional Tier 1 (AT1) | Fixed | 7.375% | Perpetual | 2032-01-15 | A$250,000 |
| UBS CH1522231294 | Additional Tier 1 (AT1) | Fixed | 7.125% | Perpetual | 2032-08-13 | A$250,000 |
| ANZ NZ AU3FN0091583 | Additional Tier 1 (AT1) | Floating | BBSW + 2.95% | Perpetual | 2030-10-18 | A$100,000 |
APRA is phasing out AT1 for Australian banks from 1 January 2027, replacing it mainly with Tier 2. Existing Australian bank AT1, including ASX-listed hybrids, is expected to be called by 2032. Most AT1 on our range is issued by overseas banks and insurers and is regulated outside Australia.
Tier 2 suits investors who want a bank's higher coupon with a maturity date and certain interest. AT1 suits only investors who can accept cancelled distributions and loss of capital. This is general information, not a recommendation.
General information only. It does not take into account your objectives, financial situation or needs and is not a recommendation. Investment opportunities through Candour Capital are for wholesale and professional investors only. Read the offer documents and seek professional advice before investing.